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US Open Preview – German data and trade hopes send euro to 1-week highs; FOMC meeting minutes in focus
July 5, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day Ahead: Eyes on FOMC minutes; US ISM non-manufacturing PMI and ADP employment report pending
On Thursday, the release of the June’s Federal Open Market Committee meeting minutes at 1800 GMT is expected to be the main headline of the day. On June 12-13, FOMC members decided to increase the Federal funds by 25bps. Moreover, the new ‘dot plot’ was revised upwards to signal two more rate hikes by the end of the year, instead of just one more indicated in the previous one, marking a total number of four increases this year. Any perceived hawkish message is anticipated to push the dollar higher and vice versa.
Before then, the US calendar will be busier, delivering initial jobless claims for the week ending June 29, ISM non-manufacturing PMI readings and the ADP employment report regarding the nonfarm private sector ahead of tomorrow’s all-important NFP report.
At 1215 GMT, June’s ADP employment figures are expected to show an addition of 190k job positions compared to 178k in the prior month. However, it should be noted that although the ADP is the only major gauge that provides a preview for the NFP print, the correlation between the two figures has fallen notably in recent years. The US dollar lost ground in the previous couple of days and today’s data could drive the greenback slightly higher if the data come in better than expected.
At the same time, initial and continuing jobless claims out of the US for the week ending June 29 will be available as well, with analysts projecting the number of people claiming unemployment benefits for the first time to increase moderately by 4,000. Later on, at 1345 GMT, the country will see the release of June services and composite PMI figures by IHS Markit. Those would pertain to their final readings though they are not expected to gather much attention – analysts expect the figures to be released unchanged relative to their flash estimates.
Another major release left on the agenda is the US ISM non-manufacturing PMI, which is due at 1400 GMT. Expectations are for the print to reach 58.3 in June, from 58.6 previously. Coming on top of recent encouraging US data, an increase in the non-manufacturing index would be one more factor supporting the case for the Fed to deliver more than three rates hikes this year and could thereby help the dollar to rise somewhat further.
The Energy Information Administration’s (EIA) report including information on US crude and gasoline stocks for the week ending June 29 is scheduled to be made public at 1300 GMT. Crude inventories are anticipated to decline by around 3.538 million barrels compared to fall of 9.891 million barrels seen in the preceding week.
In terms of public appearances, German Chancellor Angela Merkel will meet UK Prime Minister Theresa May in Berlin for talks that are likely to address the slow progress in talks on Brexit negotiations at 1200 GMT. Also today, US Secretary of State Mike Pompeo will hold a two-day meeting with North Korean leader Kim Jong-un.
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